AGENCY

1. DEFINITION, ELEMENTS, CHARACTERISTICS

Definition?
ARTICLE 1868. By the contract of agency a person binds himself to render some service
or to do something in representation or on behalf of another, with the consent or
authority of the latter.
ARTICLE 1868. By the contract of agency a person binds himself to render some service
or to do something in representation or on behalf of another, with the consent or
authority of the latter.
Excludes: employer-employee relationship, master-servant relationship, employer-independent
contractor relationship
What differs: Power in an agent to contarct with a third person on behalf of a principal
*Use of the term in other senses: the palce at which the business is transacted, instrumentality
by which a thing is done, exclusive right of a person to sell a product of another in specific
territory

Elements?
a) There is ​consent​, express or implied of the parties to establish the relationship
b) The​ object​ is the execution of a juridical act in relation to a third person
c) The agent acts as a ​representative​ and not for himself
d) The agent acts within the ​scope of his authority
e) The parties must be ​competent​ under the law to act as principal and agent
NOTE: Violation of c and d does not mean that no agency was created

Parties to the contract

1. Principal
2. Agent - attorney, proxy, delegate, representative
Note: May be either a natural person or judicial entity

Capacity of the parties

1. Principal - any person who is capacitated under the law
2. Agent - as to a thid person - need not possess full capacity since he assumes no personal
liability, as as to his principal - need to be competent and bind himself
Note: Persons who are absolutely incapacitated (e.g., insane) cannot be agent

Characteristics?
1. ​Consensual
2. ​Principal
3. ​Nominate
4. ​Unilatera​l if gratuitous - creates obligations for one, and rights for the other, ​Bilateral​ if
onerous - creates reciprocal rights and obligations
5. ​Preparatory

Nature, basis, and purpose

1. Contract - COC
2. Representative relation - fiduciary in nature
3. Purpose - extend personality of the principal thru the acts of the agent

Acts that may or may not be delegated to agents

1. In general - what a man may do in person, he may do thru another (e.g., right to inspect the
goods)
2. Exceptions
a. personal acts - personal performance is required by law or public policy or the agreement of
the partis (e.g., right to vote, right to attend board meetings, making of a will, statements
required to be made under oath, agent delegation to a sub-agent of the performance of acts
which he has been appointed to perform in person)
b. criminal acts or acts not allowed by law (e.g., purchase of private agricultural land on behalf
of an alien, relative incapacities)

Nature of relations between principal and agent

1. Relations ​fiduciary in character
2. In regard the thing forming the subject matter of the agency, the agent is ​estopped from
asserting interest adverse to his principal
3. The agent ​must not act for an adverse party ​- an agent cannot serve two masters in the
presence of conflicting interests pertaining to the same transaction, unless both consent, or
unless he is a mere middleman such as a real estate broker, otherwise, either of them may
repudiate the transaction involved
4. Agent must ​not use or disclose secret information

Agency distinguished from similar contracts.

1. ​Loan ​- money given for the borrower’s interest (loan), money given for the principal’s interest
(agency)
2. ​Lease of service​ - basis is employment, lessor performs only ministerial functions (lease of
service), basis is representation, agent performs discretionary powers (agency)
3. ​Independent contract​ - not subject to control and direction except as to the result of the
work (contract for a piece of work), subject to control and direction (agency)
4. ​Partnership​ - partner acts for his partners, partnership, as a principal of himself partnership),
agent acts for his principal (agency)
5. ​Negotiorium gestio​ (management of the buisness or affairs of an absentee) - there is both
representation; without knowledge, quasi-contract (nr), with consent, contract (agency)
.6. ​Brokerage​ - intermediary, acquires neither possession of the thing (brokerage), acquires
custody of the thing (agency)
7. ​Sale
2. CREATION OF AGENCY
a. As a contract - COC
b. As a legal relationship - agency may still arise even without a contract

Creation?
ARTICLE 1869. Agency may be express, or implied from the acts of the principal, from
his silence or lack of action, or his failure to repudiate the agency, knowing that another
person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.

Kinds of agency
1. ​As to its manner of creation
a. express - orally or in writing
b. implied - implied from the acts of the principal (e.g., ratification), from his silence or lack of
action, or his failure to repudiate the agency, knowing that another person is acting on his behalf
without authority, implied from the acts of the agny which carry out the agency, or from his silent
or inaction according to the circumstances
2. ​As to its character
a. gratuitous
b. onerous
ARTICLE 1875. Agency is presumed to be for a compensation, unless there is proof to
the contrary.
i. compensation agreed upon
ii. reasonable value of the agent’s services
ARTICLE 1909. The agent is responsible not only for fraud, but also for negligence, which shall
be judged with more or less rigor by the courts, according to whether the agency was or was not
for a compensation.
3. ​As to extent of business covered
a. General
b. Special
ARTICLE 1876. An agency is either general or special.
The former comprises all the business of the principal. The latter, one or more specific
transactions.
4. ​As to authority conferred
a. couched in general terms - authorizing only acts of administration
b. couched in specific terms - authorizing only the performance of specific act or acts
5. ​As to its nature and effects
a. Ostensible or representative - the agent acts in the name and representation of the principal
b. Simple or Commission - the agent acts for the account of the principal but in his own name

Form of agency
-In general, no formal requirements
Exception:
ARTICLE 1874. When a SALE of a piece of land or any interest therein (e.g., mortgage,
usufruct) is through an agent, the authority of the latter shall be in writing; otherwise, the
sale shall be void.
Requirements: The authorization must be (a) Written, and (b) Specific
Only specific authorization is required (and it need not be written):
(a) If the contract is a sale of an immovable other than land
(b) If the contract transmits ownership over an immovable other than land
(c) If the contract transmits ownership over land through a transaction other than a sale

Acceptance of the agency?

Implied acceptance by the agent?
ARTICLE 1870. Acceptance by the agent may also be express, or implied from his acts
which carry out the agency, or from his silence or inaction according to the
circumstances.

Case 1. Acceptance between persons present

ARTICLE 1871. Between persons who are present, the acceptance of the agency may
also be implied if the principal delivers his power of attorney to the agent and the latter
receives it without any objection. ​- personally delivers
Power of attorney: ​a WRITTEN authorization to an agent to perform specified act in behalf of
his principal which acts, when performed, shall have binding effect on the principal
Note: The presemption of acceptance may be rebutted by contary proof

Case 2. Acceptance between persons absent

ARTICLE 1872. Between persons who are absent, the acceptance of the agency cannot be
implied from the silence of the agent, except:
(1) When the principal transmits his power of attorney to the agent, who receives it without any
objection; - agent writes a letter acknowledging receipt but offers no objection to the creation of
the agency
(2) When the principal entrusts to him by letter or telegram a power of attorney with respect to
the business in which he is habitually engaged as an agent, and he did not reply to the letter or
telegram.
GR: Acceptnace y the agent is not implied from his silence or inaction since the agent is not
bound to accept the agency, he can simply ignore the offer

Communication or giving notice of existence of agency

1. By special information
ARTICLE 1921. If the agency has been entrusted for the purpose of contracting with specified
persons, its revocation shall not prejudice the latter if they were not given notice thereof.
2. By public advertisement
Note: In either use, the agency is deemed to exist whether there is actually an agency or not.
Revocation made in any manner is effective when the person dealing with the agent has actual
knowledge thereof.

3. KINDS OF PRINCIPALS AND AGENTS

ARTICLE 1876. An agency is either general or special.

The former comprises all the business of the principal. The latter, one or more specific
transactions.
-distinction based on the scope of the business covered
-general agency =/= agency couched in general terms (may be a special agency when it
involves one or more specific transactions)

Kinds of agents according to the nature and extent of authority?

1. ​Universal agent ​- authorized to do all acts that the principal may personally do and which he
can lawfully delegate to another the power of doing - assumed
2. ​General agent ​- one authorized to do all acts connected with all the particular tarde.
business, or employment of the principal
*To be a General Agent, it is sufficient that the listed authorized transactions apparently cover
all that is required to run the business of the principal. It is not necessary that the power granted
actually says “all the business of the principal.”
3. ​Specific agent ​- one authorized to do all acts connected with one or more specific ransctions
or particular occasion

Special types of agent?

1. ​Attorney at law​ - to represent the principal in legal matters or proceedings
2. ​Auctioneer​ - to sell the property to the highets bidder in a public sale
3. ​Broker​ - to act as an intermediary
4. ​Factor or commission merchant​ - to receive and sell goods for a commission, being
entrusted with the possession of the goods involved in the transaction
5. ​Cashier in bank​ - to represent a banking institution in its financial transactions
6. ​Attorney-in-fact ​- an agent having a special authroity tp do a particular act not of a legal
character granted by the principal

4. KINDS OF AGENCY AND AUTHORITY

a. Agency by Estoppel
ARTICLE 1873. If a person specially informs another or states by public advertisement
that he has given a power of attorney to a third person, the latter thereby becomes a duly
authorized agent, in the former case with respect to the person who received the special
information, and in the latter case with regard to any person.
The power shall continue to be in full force until the notice is rescinded in the same
manner in which it was given
Requisites
(a) The principal manifested a representation of the agent’s authority or knowingly allowed the
agent to assume such authority
b) The third person, in good faith, relied upon such representation
(c) Relying upon such representation, such third person has changed his position to his
detriment.
1. By special information
ARTICLE 1921. If the agency has been entrusted for the purpose of contracting with specified
persons, its revocation shall not prejudice the latter if they were not given notice thereof.
2. By public advertisement
Note: In either use, the agency is deemed to exist whether there is actually an agency or not.
Revocation made in any manner is effective when the person dealing with the agent has actual
knowledge thereof.
-This is agency by estoppel because no acceptance by the agent is required. By remaining
silent and thereby clothing the alleged agent with authority, the alleged principal is barred from
questioning the alleged agent’s authority.

b. Agency by Operation of Law

General Rule: Normally, an agency is established only if there is mutual intent on the part of the
principal and agent to establish the agency.
Exceptions: An agency may be established by operation of law, however, in the following cases:
(1) In a partnership, every partner is an agent of the partnership for the purpose of its business
ARTICLE 1818. Every partner is an agent of the partnership for the purpose of its business, and
the act of every partner, including the execution in the partnership name of any instrument, for
apparently carrying on in the usual way the business of the partnership of which he is a member
binds the partnership, unless the partner so acting has in fact no authority to act for the
partnership in the particular matter, and the person with whom he is dealing has knowledge of
the fact that he has no such authority.
An act of a partner which is not apparently for the carrying on of business of the partnership in
the usual way does not bind the partnership unless authorized by the other partners.
(2) Agency by estoppel, where the principal’s actions would reasonably lead a third person to
conclude that an agency exists;
(3) In case of certain necessity or emergency, an agency by necessity may arise. [De Leon]

5. ACTS REQUIRING SPECIAL POWER OF ATTORNEY- general acts of strict dominion or

ownership vs. acts of administrarion. Power of attorney is valid allthough no notary public
intervened in its execution
-Classification of agency as to the extent of the authority conferred (i,e. acts of strict dominion)
a. Agency couched in general terms - may be a general agency or special agency
ARTICLE 1877. An agency couched in general terms comprises only acts of
administration, even if the principal should state that he withholds no power or that the
agent may execute such acts as he may consider appropriate, or even though the agency
should authorize a general and unlimited management.

Acts of administration: ​those which do not imply the authority to alienate for the exercise of
which an express power is necessary |
Examples - see page 255-256

b. Agency couched in specific terms

ARTICLE 1878. Special powers of attorney are necessary in the following cases:
(1) To make payments not usually considered as acts of administration;
(2) To effect novations which extinguish obligations already existence at the time the
agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to
appeal from a judgment, to waive objections to the venue of an action or to abandon a
prescription already acquired;
(4) To waive obligations gratuitously;
(5) To enter into any contract by which the ownership of an immovable is
transmitted or acquired gratuitously or onerously
(6) To make gifts, except customary ones for charity or for employees in the business
managed by the agent;
(7) To loan or borrow money unless the latter act be urgent and indispensable for
the preservation of the things which are under administration
(8) To lease real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property; (e.g., mortgage)
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion.
Note: The exceptions provided are actually acts of administration

1. To make payment
ARTICLE 1232. Payment means not only the delivery of money but also the performance, in
any other manner, of an obligation.
2. To effect novations
ARTICLE 1291. Obligations may be modified by: rdmraL
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
 (3) Subrogating a third person in the rights of the creditor.
3. To compromise, etc. - the grant pf special power regarding one of the acts is not enough to
authorize the others
ARTICLE 2028. A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced.
ARTICLE 2042. The same persons who may enter into a compromise may submit their
controversies to one or more arbitrators for decision.
ARTICLE 1106. By prescription, one acquires ownership and other real rights through the lapse
of time in the manner and under the conditions laid down by law.
In the same way, rights and actions are lost by prescription.
4. To waive an obligation gratuitously - even for a nominal consideration
ARTICLE 1270. Condonation or remission is essentially gratuitous, and requires the acceptance
by the obligor. It may be made expressly or impliedly.
One and the other kinds shall be subject to the rules which govern inofficious donations.
Express condonation shall, furthermore, comply with the forms of donation.
5. To convey or acuire immovable
6. To make gifts
ARTICLE 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing
or right in favor of another, who accepts it.
7. To loan or borrow money
ARTICLE 1953. A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
quality.
8. To lease realty for more than one year - <1 ok provded the lease is not registered
ARTICLE 1643. In the lease of things, one of the parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and for a period which may be definite or
indefinite. However, no lease for more than ninety-nine years shall be valid.
ARTICLE 1648. Every lease of real estate may be recorded in the Registry of Property. Unless
a lease is recorded, it shall not be binding upon third persons
ARTICLE 1403. The following contracts are unenforceable, unless they are ratified: (e) An
agreement for the leasing for a longer period than one year, or for the sale of real property or of
an interest therein
9. To bind the principal to render service gratuitously
10. To bind the principal in a contract of partnership
11. To obligate principal as a guarantor or surety
ARTICLE 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill
the obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter
3, Title I of this Book shall be observed. In such case the contract is called a suretyship.
ARTICLE 1403. The following contracts are unenforceable, unless they are ratified:
(b) A special promise to answer for the debt, default, or miscarriage of another
12. To create or convey real rights over immovable property
13. To accept or repudiate an inheritance
ARTICLE 1044. Any person having the free disposal of his property may accept or repudiate an
inheritance
14. To ratify obligations contracted before the agency
15. Any other act of strict dominion - a sale or purchase of personal property, but not sale or
purchase made in the ordinary course of management as it is merely an act of administration
and therefore included in an agency couched in general terms

Notes:
-A SPOA may be oral or written, but if it is oral, it must be duly established by evidence.
-If an agent performs a transaction under Art 1878 without specific authority therefor, the
transaction is unenforceable. However, the agent can still seek the principal’s ratification.
-Where an instrument specifies and defines powers and duties, all such powers and duties are
limited and confined to those which are specified and defined, and all other powers and duties
are excluded.
-Types of Powers of Attorney

1. General Power of Attorney – authorizes your Agent to act on your behalf in a variety of
different situations for administration and general supervision and management
2. Special Power of Attorney – authorizes your Agent to act on your behalf in specific
situations only, particularly acts of dominion or ownership in real estate.

ARTICLE 1879. A special power to sell excludes the power to mortgage; and a special
power to mortgage does not include the power to sell.
ARTICLE 1880. A special power to compromise does not authorize submission to
arbitration.
-because while the principal may have confidence in the agent’s judgment, the arbitrator may
not possess the trust of the principal

6. Rights and Obligations of an Agent

ARTICLE 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority
or legal representation, or who has acted beyond his powers

a. Responsibility of Two or More Agents

7. Rights and Obligations of a Principal

a. Obligations of Two or More Principals